PENN Targets Texas Casino As Company Reports Rise In Revenue In Q3
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PENN Entertainment is “ready to play offense” in Texas as the company targets opening a casino in the state. The comments came during the company’s Q3 earnings call, where the casino giant reported record retail revenue.
A Texas casino is a more realistic prospect after the midterms, which saw longtime gambling expansion opponent Lt. Gov. Dan Patrick and Gov. Greg Abbott lose their reelection bids.
CEO Jay Snowden said the company “has been making investments in the state of Texas for decades,” highlighting the two horseracing tracks it owns.
“We’ve got two great assets there, and we’re ready to play offense. It’s not a defensive play for us,” he added. He also said the company’s “great lobbying team” in Texas puts it in a strong position.
“We think we’re positioned as well, if not better, than really anybody in the sector if something does happen in Texas,” Snowden said.
PENN would face strong competition, with Texas-born Tilman Fertitta also targeting a casino in the state, especially as Fertitta nears completion of its takeover of Caesars. Las Vegas Sands has also made no secret of its ambitions to open a casino in North Texas.
PENN Reports Record Retail Revenue
PENN reported third-quarter revenue of $1.84 billion, up 7.1% year over year, driven by record retail revenue of $1.49 billion. Retail adjusted EBITDAR rose 7.7% to $501.8 million.
“The impressive returns from our recent investments in our portfolio underscore the opportunity across our remaining development pipeline and position us very well for future growth,” said Snowden.
The company’s troubled Interactive segment generated $348.4 million in revenue, an increase of 17% from Q3 last year. This helped reduce its adjusted EBITDA loss to $18.3 million.
While Adjusted EPS surpassed consensus, Consolidated Adjusted EBITDA ($284.0 million) came in below Wall Street consensus expectations, which had modeled around $438 million. This was partly driven by model differences around lease accounting and digital expense timing.
Hollywood iCasino App and Alberta Launch Boost Interactive
The Interactive sector has steadied since PENN abandoned ESPN Bet last year to focus its sports betting efforts on theScore Bet in the US. It has also been rolling out its dedicated, standalone Hollywood Casino app across several states.
“U.S. iCasino revenue growth was driven by the strength of standalone Hollywood iCasino, supported by efficient user acquisition and reinvestment,” said Snowden.
Snowden also said the company was pleased with its launch in Alberta, which is outpacing Ontario since regulating its iGaming market in July.
Full-year interactive guidance was adjusted to include a $20 million investment specifically for the Alberta launch.
“The Score brand in Canada is really helping us. Our share of voice in our marketing is very good,” said CTO Aaron LaBerge on the earnings call. “On the OSB (online sports betting) side, our handle share grew each month since launch faster than market too.”
However, management acknowledged lower volumes across U.S. online sports betting and integrated iCasino, along with “customer-friendly OSB outcomes”. Despite improvement, the sector continues to make a loss.
Illinois, Ohio and Nevada Expansions Add to Retail
The record retail revenue was aided by expansions in Illinois and Nevada. Opened in June, Hollywood Aurora experienced its first full quarter of operations in Q3.
The move from a riverboat casino to a full development led to its active database growing by 96% year-over-year and revenue doubling. Hollywood Columbus in Ohio also added a new hotel, which helped increase revenue by 18%.
“Aurora and Columbus have been a pleasant surprise for us, and we don’t see that slowing down as word of mouth continues to get out about what a quality experience we’re offering there,” Snowden said.
The addition of a new hotel tower at the M Resort in Las Vegas led the property to achieve record Q3 revenue, both in slot and table volumes. However, unfavorable table game hold cost roughly $2 million. Overall, West Segment Adjusted EBITDAR dipped slightly from $51.1 million to $50.9 million.
The state-level crackdown on unregulated skill-based slot machines in Pennsylvania and Missouri has also helped contribute to one of PENN’s strongest Octobers on record.
The company’s share price dropped from $17.67 to $16.84 upon release of the results, but recovered to $17.34 in after hours trading. The price has risen by almost 9% in the last month.
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